The Engadget Mobile Interview: Sky Dayton, CEO of Helio

Ryan, Chris, and I had the chance to sit down with Helio CEO Sky Dayton, almost exactly a year after we first interviewed him. A lot has changed in twelve months -- for starters, Helio hadn't even launched yet -- so read on to hear how the MVNO's been doing, what he really thinks about the iPhone, and why he's so excited about excited about their latest handset, the Ocean.

Last time we sat down with you it was a few months before Helio had launched. A year later, how has it been? Where are things now?

Yeah, so when we had last talked, we had no members. It was just an idea. It has been an amazing ride so far. It is great to be here and be able to talk about Ocean for the first time. Something we have been working on since even before Helio was a company.

I remember you mentioning a year ago that you had a Sidekick competitor coming out.

We were coy for a long time. We were just so focused on building it and working really hard, with a lot of travel to and intense amount of work by our team, so it is great to be here and be able to talk about this.

Has Helio met your expectations? Have you hit the number of subscribers that you thought you were going to make? How has growth been?

The growth has been incredible. There are some numbers that were announced as of the end of the year. This is a company that really came from nowhere and we exited the year with over a hundred million revenue run rate and an ARPU [Average Revenue Per User] of $100 per member, which is twice the industry average. So, it has been fun. The coolest part about it is how much we have been able to innovate in an industry that is not really known for a tremendous amount of innovation, at least when it comes to carriers. I counted, I think 13 industry firsts in our first 12 months. I think six of those are in Ocean. Things like the world's first dual-slide. Probably the most integrated messaging application on mobile device, IM, text, and picture messaging, email from all the major portals. Corporate, email, POP and IMAP all in one place. Presence detection in the address book, so if I want to contact Justin [Ried, Helio's Marketing and Communications Manager] I can see his phone number. I can see his e-mail address. I can see his IM and if he is logged in right now and I can see that in the address book. No click search. I think is another industry first on the device, just out of the box just start typing and a search comes up. So it has been great. This is realizing a lot of the promise that we came into Helio with.

What has turned out to be a real challenge over the last year? The MVNO market is not an easy market to break into here, or anywhere, but especially here in the US. ESPN dropped out of the market. Amp'd has obviously had its struggles. Is there anything that turned out to be harder than you were expecting? What surprised you about the market?

You know, it is really important to bring something different to the market. It is not, you know, about taking an off-the-shelf phone and slapping a logo on it and marketing it. Helio is more like a traditional carrier in our ability to innovate, but then we go even beyond that in our capabilities, so, I think to really bring something different to market is complex. It is a big business. It is a scale business. If you look at Ocean, we are heavily involved in this device from the design of the device to the software that runs on it, the operating system, the integration with back end systems. And a lot of the key building blocks that we were able to put in place over the last couple of years you can really now see. So, I think there is going to be a limited number of competitors. I think we have demonstrated our ability to innovate, and in some ways I think we are the most advanced carrier in the .

One of the complaints that people have made about Helio since you launched is that the service is too expensive, especially given that you're aiming at a younger demographic. How much resistance have you seen to the pricing you have in place for your service plans? Are there any plans to lower the price of your service plans?

If you just want voice, like if you just want to talk, that is not what Helio is about. But when you add up the cost of unlimited text messaging and picture messaging, unlimited web browsing, access to MySpace, GPS, all the stuff that is part of the Helio All-In plan, it is actually very competitive. $65 is the entry level All-In plan and that compares very favorably with you'd get from other carriers if you add in all those things. In most cases it would cost more than $65. [Helio] is actually very affordable and I think that's the reason our ARPU [Average Revenue Per User] is higher is because our members are really active. On average they send and receive 400 text messages a month. I think the industry average is like 50. They are voracious users of MySpace Mobile and GPS-enabled Google Maps and Buddy Beacon. They use it. And that is why we say don't call it a phone. It is so much more than that. So, it is affordable. The pricing that we talked about for Ocean is $295 and, at least for us,for the first time it's all the creativity that we have here at Helio expressed in a device.

And we are looking at a May release for the Ocean?

It'll be later this spring.

One of the ideas that seems central to Helio is the notion that vertical design innovation and vertical integration of these phones is important to make an impact in the market. When you look at the Ocean and you look at the iPhone, those are obviously very vertically oriented products. I am curious if you think that that is where the industry is headed, because there are a lot of people who would prefer that the wireless industry were more like the PC market.

I think that is a really good point. You know, design has not been part of the language of the carrier industry. If you walk into typical carrier store and look at the devices, they all pretty much look the same. You've got your folders, you've got your sliders, you got your bar-types, you've got your QWERTYs. I think that we are now entering a phase where design is important and consumers want to look for that, and it is not just the design of the device thing, the ID, but the design of the software.

We are unique in that we really care about that and we have the capability to influence and then that means, a lot of times going deep into the guts of the product to make it work. We are part of the next wave of wireless, which is specific products and brands targeted to specific types of consumers. We are not for everybody. We are designed for a specific consumer that cares about this stuff. I think that's a big trend that is going to play out where you have the large generalist carriers, they are like department stores. They sell a little bit of everything to everybody. If Verizon is J.C. Penney, we are Urban Outfitters. And it is not only a different brand, but a different target.

You knew this was coming: How do you think the iPhone is going to impact the wireless industry in general and Helio in particular?

I think that great design promoted broadly is going to help consumers make that a part of their buying decision for the first time. They're going to be saying, "Wow, you know, I want something that looks cool and has a great UI," and they are going to actually care about that now. And I think that is something that really plays to Helio's strengths. I think from a price point perspective, $500 to $600 subsidized is expensive. It is definitely entering as a top end product. In any market you are going to have different price points and different consumers will go to them. However, I think that there has never been a massively successful consumer electronics device that relies entirely on an input mechanism that has no tactile feedback. You remember Tron. The keyboard in the desk and everyone is like, "Oh, my god, that is the future." Well, here we are in the future 20 years later and nobody does that. Why? Because you need to feel like you are touching something. At the same time, we are different. We created a device that is really all about communication, with incredibly well integrated IM and email and text and everything in one place. Presence detection in the address book. On a 3G network and one that doesn't really compromise on the things you want to do. You want to talk, so making calls is great. And you want a QWERTY with a layout that feels comfortable, and buttons that you can feel that you are actually pressing.

How has subscriber growth been? Is it continuing at the pace you were expecting or is it starting to level off? What sort of targets do you have for this year?

Well, I can share with you what has been announced publicly, which is that we are on track to hit our first 100,000 members in Q2.

Is it growing as fast as it was six months ago? Is the pace of subscriber growth accelerating or slowing?

It's been like drinking from a fire hose!

If you have 100,000 subscribers now, how many does Helio need to be a sustainable business venture?

Since we are a joint venture of two public companies they talk about that stuff and they issue guidance, and that stuff is out there, which you can look to from analyst calls and earnings releases. We get to focus on the product stuff.

Speaking of venture partners, EarthLink is introducing a WiFi VoIP phone, can you tell us whether there is going to be some crossover between EarthLink and Helio and integration. Will we see a Helio phone with WiFi in it that does VoIP?

As you know, we are pretty good at keeping our products close to us until we are ready to talk about it. Clearly, it is an area that is very interesting to us, as you can imagine for many reasons.

How is the relationship with SK Telecom?

Oh, it is great. I was just there last week, I love Korea.

How involved are they with the designs of the handsets? There is obviously a lot of expertise there, especially when you talk about EV-DO devices.

Yeah, we get to tap into SK Telecom's resources, they spend $200 million a year in R&D, which is very unusual for a carrier. Most carriers just let their vendors do the R&D. They do their own primarily R&D and we get to use that. Even so, we are also doing some things that haven't been done, even in , and that is satisfying. The team that we have that came from SK Telecom are rock stars and that is one of the reasons that we are able to do a lot of what we do.

Mobile digital television is very big in Korea, with a lot of devices coming with built-in DMB tuners. We are starting to see the rollout of similar systems here in the with MediaFlo and Modeo. Is this something that Helio is thinking about offering at any point?

Let me ask you, when was the last time you watched linear programming?

On a phone?

Of any kind. When was the last time you just turned the TV on? At least for me, linear programming is over. I TiVo stuff. I download stuff. I watch what I want to watch, when I want to watch it. And so with Helio we've really focused on going out and getting cool content like The Onion, Ask a Ninja, Rocketboom, in addition to traditional stuff like music videos and MTV and Comedy Central and stuff like that. That has really been our focus and will continue to be.

Well, that actually begs another question, is Helio's closed platform holding back Helio users from using stuff like Slingbox or Orb to placeshift their content?

First of all, we have got a great Java Virtual Machine on it, so games and stuff like that are great. And we are able to integrate stuff because we our common layer is Java. What we try to do is to, say, start with something like MySpace and if we want to enable people to access MySpace, how do we do that? How do we make it really work? And really think about that experience, too. We have an HTML browser on there, so you can go to the MySpace site, but it is not nearly as good as the application that we created that.

We keep thinking about an experience and then how to translate that experience into this device. How it works in landscape and portrait. How it takes advantage of the keyboard. How it does all these cool things. And, so far we have been able to do it and we are going to keep innovating. If you come to Helio we have this thing on our badges that says, "Innovate or die." And it is something we try to think about every day.

So then what is the next step in mobile device innovation and mobile technology? Where do you think things are going?

Well, I think QWERTY is a trend that will continue. There is a trend that we are already on, and that is the integration of different pieces. For example, there is something on here called Helio UP. With it you can GPS tag a photo or a video or add other tags and create. It's about access, about being able to connect, not only to your friends, but to your content, and share it and transact it. You know, we introduced gifting and begging to this market and the ability to share purchased stuff with your friends, whether it is a music video, a song from our music store, or a ring tone or whatever. I think we are going to see content become like particles of communication that are transacting and shared between people just like e-mails or pictures or anything else.

Where would say things are going in terms of devices?

You know, I think with Ocean it is the first time that you've got something that doesn't compromise on the things that you want to do, I think this is huge. In terms of device trends, I don't know. We may have reached the point of the pendulum swinging to the apex of the other way, which is small. It is like calculators in the Eighties. Remember when calculators were big and there was a race to make calculators as small as possible? It was the corollary to making the boom box as big as you possibly could, to the point where had to have a hand truck to carry it around. We will find an equilibrium of the right size, a combination of size and the things that we want to do. Being able to have a roomy keyboard that is wide, I think that is really cool. IBut when I do this [dials a number on the Ocean's numeric keypad] I don't want a roomy keypad. I want something that is narrow. So, I'll let you guys speak on the trends, but I think we might be on to something.